Super Micro Computer stock declined sharply following the release of preliminary results for its March quarter. The server maker's report fell short of prior company guidance and market expectations. The stock dropped approximately 11% after the announcement.
Preliminary revenue is expected to range between $4.5 billion and $4.6 billion. This figure represents a notable decrease from earlier guidance, which projected revenue between $5 billion and $6 billion. Earnings per share are also anticipated below estimates, projected at $0.29 to $0.31 per share.
Super Micro attributed the miss to delayed customer platform decisions that shifted orders to the next quarter. However, the size of the shortfall raises questions regarding broader demand trends in the market. It could also suggest a potential loss of market share to competitors, including Dell Technologies.
The outlook for the sector appears increasingly difficult. The U.S. economy contracted during the first three months of the year. Policy proposals, such as President Donald Trump’s suggested tariffs on trading partners, could increase inflation risk. The AI sector may face cost cuts during an economic slowdown, as most AI investments are currently not profitable for companies. Sell SMCI Stock After Earnings Miss? Export restrictions could also pressure U.S. server manufacturers like Super Micro.
There is also a possibility that companies may begin to focus on improving the efficiency of their code instead of solely expanding computing power, following several years of substantial investment in AI infrastructure. While Super Micro previously forecast fiscal 2026 revenue could reach $40 billion, a 70% increase from FY25, these projections may be hard to achieve given the macroeconomic challenges and the recent earnings setback.
Super Micro stock does have positive factors. The company's server products work closely with Nvidia's GPU technology. Demand for SMCI server platforms could increase as Nvidia ramps up production of its new Blackwell chips. The company has also been expanding its offerings in the direct-liquid-cooled server market, considered a key technology for AI workloads.
The company's valuation metrics also remain low. SMCI trades at roughly 13 times its estimated 2025 earnings. This figure is significantly below the S&P 500 index, which trades at over 20 times forward earnings. The company's revenue grew at an annual rate of 74.5% over the past three years.
Investors are advised to exercise caution with Super Micro Computer stock. Super Micro has encountered controversies over the past year, involving allegations of accounting irregularities, delays in Securities and Exchange Commission filings, and examination from short-sellers. Recent financial statement filings have eased some of these issues. However, the latest preliminary earnings miss, combined with past corporate governance concerns, suggests investors should be cautious.
